Clipped from: https://www.business-standard.com/article/markets/share-sale-overhang-on-yes-bank-as-three-year-lock-in-nears-end-for-lender-123030700461_1.html
Passive trackers likely to sell 67 mn shares; another 1.35 bn could be offloaded by individual investors
Shares of YES Bank could witness downward pressure as exchange traded funds (ETFs) and individual investors could make a dash for exit as soon as the forced lock-in period ends on March 13.
These investors held stakes in the bank before the reconstruction scheme, which imposed a three-year lock-in on 75 per cent of shares held by existing investors.
Prior to its recapitalisation plan, the private sector lender was a member of the widely-tracked Nifty and Bank Nifty indices.
The stock was deleted from the Nifty and the Bank Nifty index February 18. But the change was to become effective from March 27. Hence, ETF trackers were required to sell the stock only on March 26.
Before the trackers could do that, the three-year lock-in period kicked in on March 13,2020 and forced them to hold onto these shares even as YES Bank was no longer part of the Nifty and Bank Nifty indices.
“We estimate there are at least 67 million shares of YES Bank that are held by these trackers. They will likely sell as early as possible,” said analyst Brian Freitas of Periscope Analytics, who publishes on Smartkarma.
ETFs are not required to hold on to shares that are no longer part of their underlying index.
SBI ETF Nifty 50, Kotak Nifty Bank ETF and Nippon India ETF Bank BeES are the top three ETFs holding YES Bank shares due to the lock-in. It remains to be seen the treatment applied by each fund house.
Typically, in such cases, ETFs write off the investment or create a side-pocket if there is a scope for realisation of value in future.
Besides ETFs, individual investors–retail, high net worth individuals, and NRIs—hold 1.35 billion shares of Yes Bank that are under lock in. “Even if they sell just 20 per cent of their locked-up stock, that is over 5 days of delivery volume,” highlights Freitas.
Shares of YES Bank last closed at Rs 16.9.
The big shareholders of YES Bank shares are eight financial institutions led by state-owned State Bank of India (SBI), who had come in as part of the recapitalisation exercise in March 2020. Shares were allotted to them at Rs 10 apiece.
The lock-in on about 11 billion, or three-fourths, of their shares is set to expire on March 13. Some of the lenders have already disposed a portion of their 25 per cent shares on which there was no lock-in.
“With YES Bank stock trading nearly 70 per cent higher than their purchase price, some banks will look to unwind their stake (partially or fully). If all banks look to sell their stake, that is nearly 11 billion shares (worth Rs 18,590 crore),” said Freitas.
Despite the ensuing selling pressure, the stock has managed to hold its ground over the past one month. Experts say, as YES Bank is not part of the futures and options (F&O) segment, there is no prior positioning by short-sellers in the counter.
|ETFs||Share held (mn)|
|SBI ETF Nifty 50||23.67|
|Kotak Nifty Bank ETF||11.99|
|Nippon India ETF Bank BeES||10.56|
|SBI-ETF Nifty Bank||6.72|
|UTI Nifty 50 ETF||5.89|
|Lenders||Share held (mn)|
|Kotal Mahindra Bank||500|
|IDFC First Bank||250|